Saturday, January 25, 2014

Storytelling:
So, is this “a correction” or the end of a bull market? It'll
take several weeks to be sure and by then you'll have made the wrong
decision several times. There are a plethora of explanations for the
sudden shift from excited bullishness about double-digit gains to a
haunting fear that the party might be over – just remember that
these stories come from the same folks who were
telling happy stories last week.

He's
My Brother:
Nearly half of New York City food pantries/soup kitchens report
running out of supplies following the Republican dismemberment of the
food stamp program. Even before the reduction in SNAP benefits,
about 40% of NYC recipients used food pantries to supplement their
food budgets. Now about 25% of pantries report having to turn people
away. But on the positive side, just like cutting unemployment
benefits will, at least in Republican minds, reduce unemployment,
cutting food for the hunger will do away with hunger. What'll we do
with the corpses?

What
Could Go Wrong?
When I was young and impressionable (I'm no longer young) I was
taught to consider well-run companies when their stock PE dipped
below 10 and to flee when their PE rose toward 20. Netflix, a recent
darling of the punditry, is selling at about 300 times earnings yet
has no free cash flow. Hmm.

Blame
Where Blame Is Due:
Technology is, to some degree, responsible for the cheapening of
labor in the US and the evaporation of jobs, but it is only part of
the story. The destruction of unions in the US and the export of
jobs to the lowest bidders overseas play a far greater role. “The
robots are coming” is an excuse, not an explanation. Technology
may contribute to creating wider choices for consumers, but it does
little to create consumers, i.e. people with jobs and incomes.

Half
A Loaf:
Ukrainian President Viktor Yanukovych, having lost control of cities
across the western part of the country and faced with an ongoing
occupation in the center of Kiev has offered to make a deal with the
pro-European Union democracy movement; he would continue to do
exactly what they don't want if
they would only give up and go home. With
an unerringly tin ear, the US has chosen the side of an
authoritarian regiem over democracy once again.

Progress:
Over 10,000 Ohio food stamp recipients lost that benefit this month
because they did not spend at least 20 hours a week working, going to
school, attending job training, or volunteering. Ohio Republicans
hope to kick another 140,000 adult recipients who don't have
dependent children off food stamps for the same reason over the
coming months. new work requirements because apparently that makes
sense in some other world.

First
Count of the Indictment:
The Trans-Pacific Plundering agreement will establish a regulatory
framework that meets the demands US pharmaceutical and digital
technology behemoths, permitting them to 'evergreen' drug patents
indefinitely. The US is also demanding a clause which could give
major corporations the authority to to overturn laws made by
governments in their national interests if such laws interfere with
profits. The US trade rep insists that the TPP “is going to be
completed..: The 'or else' was implied. The US insists that the TPP
be approved before the text of the agreement is made public.

Leadership:
John Boehner now admits that he “led” the Republican efforts to
shut down the government last fall not because he thought it was a
good idea or that it would succeed, but because “a leader without
followers is simply a man taking a walk.” The Parting Shot:

2 comments:

«When I was young and impressionable (I'm no longer young) I was taught to consider well-run companies when their stock PE dipped below 10 and to flee when their PE rose toward 20.»

That is also what I learned, and it makes a lot of sense, as a PE of 10-15 is or should be the average, given the risks of owning individual stocks.

But for the past 30 years PEs have gone up and up and up; just like, not coincidentally, house price to median income ratios have gone up and up and up.

The reason in both case is that rising valuations of *collateral* means that margin lending can become ever bigger, boosting the profits of financial companies.

Because the most profitable thing that a financial company can do is to lend to a risky customer, thus at a high interest rate, but with the whole value of the loan covered in accounting terms by the valuation of its collateral, this making the loan actually entirely safe and this requiring no profit reducing reserves against potential future losses.

Thus as long as the valuations of collaterals go up and up and up and up financial companies are money making machines, distributing a large chunk of their accounting profits to executive and traders.

Therefore the obsession of treasury and central bank officials with always boosting up and up and up and up the valuations of whatever collaterals financial companies use.

It is the perfect strategy for becoming rich in cash terms while being applauded by median voters who can't believe how rich they are becoming in nominal terms!

Our Motto

Keep fightin' for freedom and justice, beloveds, but don't you forget to have fun doin' it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin' ass and celebratin' the sheer joy of a good fight, be sure to tell those who come after how much fun it was.